Bankruptcy Filing Limits Increased
Congress is expanding the thresholds for bankruptcy eligibility. S.3823 increases the Chapter 13 debt limit by $2.75 million and allows both secured and unsecured debt to count towards this single limit. This increase constitutes a win for the consumer and small business debtors, many of whom have mortgage, business, and/or student loan debts exceeding the prior limits. Consumers with large debt issues can now opt for the simplified process of Chapter 13, rather than the more onerous requirements of Chapter 11.
Congress also extended the limits for the new, simplified version of Chapter 11, known as Subchapter V. The Subchapter V debt limit of $7.5 million for small businesses electing to file for bankruptcy, which had expired on March 27, 2022, has been given new life. Both increases have a sunset provision after two years from the date of enactment
The National Association of Consumer Bankruptcy Attorneys was instrumental in obtaining the strong, bipartisan support which was necessary for the passage.